Strolling the Agora: Is There A Trend For Supermarkets To Become Regular Tenants In A Regional Mall? Don’t You Believe It

Posted on October 4, 2010

Strolling the Agora column for the October 4th 2010 edition of SHOPPING CENTER DIGEST

By Murray Shor

Been hearing a little rumble here and there about
supermarkets becoming important tenants in regional malls, taking advantage of
the large number of big-box vacancies available and seeing that as an
opportunity to expand their base. Don't you believe it?

I don't doubt that in some isolated instances it could happen, such as
discounter Aldi now
taking several locations in the Chicago market.
Nor do I dispute that some surveys report those in a trade area may put a
supermarket high on their list of tenants they'd like to see in their neighborhood mall.

However, what people say is not what people
generally do, especially when answering a survey. But, go on to reality.

First, people shopping for their weekly groceries
are not going to push a shopping cart loaded with perishables such as meats,
frozen foods, milk and butter through a mall while checking out the latest
fashions at Victoria Secrets or Ann Taylor. Nor would any of these
stores want a customer browsing through the racks with a cart of melting ice
cream.

And maneuvering those carts up an escalator?

Little Cross-Shopping

Result: There would be very little cross-shoppingeven if the mindset were there. Supermarket shopping
is a chore; mall cruising and browsing, entertainment,except, maybe during the stressful holiday
seasons. Just one minor reason mall landlords may not welcome these tenants
with open arms.

Now get into the logistics, for a momentand the high value placed mall management
places on parking spaces, especially those nearest to store access and the main
entrances to the main mall. Supermarkets require heavy traffic, and their
customers require substantially more parking spaces than those normally shopping
at a mall; the distance between the car and store has to be substantially
shorter. Question: Know anyone willing to push a loaded cart 200 yards to a
parked car?

Then comes the large number of 18-wheelers coming
in to replenish a supermarket
on a daily basis; this traffic is much heavier
than similar vehicles replenishing merchandise for other tenants because some
stock turns at food stores go into double-digits; some departments require
daily replenishment. These vehicles have to be kept away from the large numbers
of personal SUVs; the result is a completely different and more demanding
traffic pattern.

Those adherents saying it's a good idea for this type of tenant to head
for the malls point to some of the big-box discounters, warehouse clubs, and other
promotional merchants carrying groceries who are already common in malls: Target, CostCo, Walmart, BJ's, and the like. Yes, they carry
groceries among their merchandise, but not a full-line of products: meats,
fresh fish, frozen foods, produce, etc., etc.

It's true that some of these big-box users are attached to the mall,
but many of them do not have direct access, and their parking spaces
essentially just serves their stores. In this situation, a supermarket could be
a likely candidate to take the space.

We're talking here, however, of a supermarket being an integral part
of the mall, rather than an add-on.

How It Can Work

Supermarket operators are not known for paying
high rents. The average mall rent paid across the nation for non-anchor tenants
is around $38 per sq. ft. And to this add one-third to cover the CAM charges
and other ad-ons: another
item supermarketers are not known to contribute to without complaint. If you
know a supermarket chain willing to pay those dollars, let me know and I have a
number of great mall locations they should look at.

No way would these experienced and tight-fisted
operators agree to these expenses, and whatever else may be included in the
Reciprocal Easement Agreements made between the owner-developer and the
department store anchors.

Landlords do understand supermarket customers hit
their shopping centers on a weekly basis, much more frequently than they would
if it were a regional mall. So they'd like to build on this loyalty to place and bring the customer to
their properties more frequently. This is why many malls have a separate,
service-oriented strip center next to their major malls, and containing a
supermarket, maybe a liquor store, barber shop/beauty parlor/nail salon,
stationery store, dry cleaner, and the like.

Separate access, but visible, lower rental and
operating costs than locating in a mall, less hassle for shopper merchant and
landlord, and a win-win for all concerned.

Other Interesting Activity

_______________________________

American Theatre CorpandCinema Grilleare looking for big-box vacancies in shopping
centers that are suitable for theatre use. Contact David Postle,depostle@msn.com .
_______________________________

Doctors Express, a
health-clinic franchise based in Towson, MD, recently made some 74 franchise
agreements in 21 states and expects to have 35 operating by year-end. A visit
to a hospital's Emergency Room
costs about $575; at DE's
urgent-care centers, the cost is about $125.

JC Penney Cosays its new-store expansion over the next five
years will be targeting mall and off-mall locations, and expects to boost its
sales by $1 billion over the next five years. It had opened about 150 of these
units before the recession hit, and has an ongoing program to complete
renovations of about 400 units by the year 2014.
_______________________________

General Growth Propertieswill no longer have a member of the founding
family, the Bucksbaums, since
brothers Martin and Matthew built their first center in their home town of
Cedar Rapids. Those running the bankrupt development company chose not to give
Chief Executive John Bucksbaum a seat on either of the two new boards being
created; the reason given is that he failed to inform them that the family
trust failed to inform them of the $100 million of loans made by the family
trust to two GGP executives to cover margin calls on their company stock.

Strolling the Agora was a twice-monthly column discussing trends, issues of importance, and commentary on the leasing/development aspects of the shopping center/retail chain industry in the US and Canada. Called Strolling the Agora, it was a part of Shopping Center Digest, a newsletter founded in 1973 published until September 2010. The column provided expert insight into various retail focused topics. It was primarily authored by Murray Shor, Editor & Publisher as well as industry and veteran retail experts. A smattering of archived columns are presented here for your reading “pleasure”. It's an interesting “look back” at what were current hot topics at the time with regard to shopping center/retail industry focus, development and leasing expansions and processes, retail mix, opinions and more.

About Murray Shor:

Reporting and writing on the shopping center/retail industry since the late ’60s. Began as editor at Chain Store Age, founded Shopping Center World (now Retail Traffic), Shopping Center Digest “The Locations Newsletter” in 1973, and the Directory of Major Malls in 1979. Each issue of Shopping Center Digest contained a column called Strolling the Agora which provides commentary on trends, activity, issues of concern to development and leasing in the shopping center/retail industry.